<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12430
WESTERN ATLAS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3899675
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
360 NORTH CRESCENT DRIVE
BEVERLY HILLS, CALIFORNIA 90210-4867
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 888-2500
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
On July 31, 1996 there were 53,580,626 shares of Common Stock outstanding.
Page 1 of 15
<PAGE>
WESTERN ATLAS INC.
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations
Six months ended June 30, 1996 and
June 30, 1995 3
Consolidated Statements of Operations
Three months ended June 30, 1996 and
June 30, 1995 4
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and
June 30, 1995 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 9
Signature 15
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTERN ATLAS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1995
---------- ----------
<S> <C> <C>
Sales and Service Revenues $1,175,947 $1,071,858
---------- ----------
Costs and Expenses
Cost of sales (exclusive of depreciation
and amortization shown below) 813,040 730,875
Selling, general and administrative 147,720 143,570
Depreciation and amortization 109,009 102,083
Interest - net 18,640 22,285
---------- ----------
Total 1,088,409 998,813
---------- ----------
Earnings before Taxes on Income 87,538 73,045
Taxes on Income (35,001) (29,583)
---------- ----------
Net Earnings $ 52,537 $ 43,462
---------- ----------
---------- ----------
Earnings Per Share $ 0.97 $ 0.81
---------- ----------
---------- ----------
Shares used in computing
earnings per share 54,328,152 53,796,042
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
WESTERN ATLAS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1995
---------- ----------
<S> <C> <C>
Sales and Service Revenues $ 626,491 $ 565,968
---------- ----------
Costs and Expenses
Cost of sales (exclusive of depreciation
and amortization shown below) 434,751 390,560
Selling, general and administrative 76,699 72,391
Depreciation and amortization 55,433 51,385
Interest - net 9,876 10,837
---------- ----------
Total 576,759 525,173
---------- ----------
Earnings before Taxes on Income 49,732 40,795
Taxes on Income (19,879) (16,522)
---------- ----------
Net Earnings $ 29,853 $ 24,273
---------- ----------
---------- ----------
Earnings Per Share $ 0.55 $ 0.45
---------- ----------
---------- ----------
Shares used in computing
earnings per share 54,414,281 53,888,305
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
WESTERN ATLAS INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities $ 47,424 $ 116,715
Accounts receivable 661,608 612,336
Inventories less progress billings 162,458 150,855
Deferred tax assets 114,330 117,189
Other prepaid expenses 37,212 39,385
----------- ----------
Total Current Assets 1,023,032 1,036,480
----------- ----------
Property, Plant and Equipment - at cost 1,397,171 1,336,813
Less accumulated depreciation (651,264) (613,165)
----------- ----------
Property, Plant and Equipment, Net 745,907 723,648
Goodwill and Other Intangibles, Net 459,540 462,873
Geophysical Data and Other Assets 287,964 266,211
----------- ----------
Total Assets $2,516,443 $2,489,212
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable $ 361,107 $ 380,569
Payrolls and related expenses 113,336 137,739
Notes payable and current portion of
long-term obligations 26,943 24,106
----------- ----------
Total Current Liabilities 501,386 542,414
----------- ----------
Long-term Obligations 537,854 535,034
----------- ----------
Deferred Taxes and Other Long-term Liabilities 57,372 54,917
----------- ----------
Shareholders' Investment
Common stock 53,547 53,235
Additional paid-in capital 1,139,653 1,129,417
Retained earnings 218,330 165,793
Cumulative currency translation adjustment 8,301 8,402
----------- ----------
Total Shareholders' Investment 1,419,831 1,356,847
----------- ----------
Total Liabilities and Shareholders' Investment $2,516,443 $2,489,212
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
WESTERN ATLAS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1995
-------- -------
<S> <C> <C>
Cash and Cash Equivalents at Beginning of Period $116,715 $42,094
-------- -------
Cash Was Provided by (Used for) Operating Activities
Net earnings 52,537 43,462
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 109,009 102,083
Change in accrued pensions (17,300) (13,372)
Change in accounts receivable (49,075) 53,689
Change in inventories (11,595) (28,798)
Change in accounts payable (25,241) (60,331)
Change in payrolls and related expenses (12,453) (7,526)
Other operating activities 10,027 (22,245)
-------- -------
Cash provided by operating activities 55,909 66,962
-------- -------
Investing Activities
Proceeds from sale of business 12,051 120,732
Purchase of capital assets (116,434) (93,632)
Geophysical data, net (21,097) (32,454)
Other investing activities (10,293) (4,496)
-------- -------
Cash used for investing activities (135,773) (9,850)
-------- -------
Financing Activities
Short-term obligations, net (313) (13,616)
Repayment of long-term obligations - (38,833)
Other financing activities 10,886 13,891
-------- -------
Cash provided by (used for) financing activities 10,573 (38,558)
-------- -------
Resulting in (Decrease) Increase in Cash and Cash
Equivalents (69,291) 18,554
-------- -------
Cash and Cash Equivalents at End of Period $ 47,424 $60,648
-------- -------
-------- -------
Supplemental disclosure of cash flow information
Interest paid $ 21,617 $23,061
Income taxes paid, net of refunds $ 3,199 $36,056
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
WESTERN ATLAS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996
1. The amounts included in this report are unaudited; however in the
opinion of management, all adjustments necessary for a fair statement of
results for the stated periods have been included. These adjustments are of
a normal recurring nature. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. It
is suggested that these consolidated financial statements be read in
conjunction with the audited financial statements and notes thereto included
in the Company's 1995 Annual Report on Form 10-K. The results of operations
for the six months ended June 30, 1996 are not necessarily indicative of
operating results for the entire year.
2. The components of inventory balances are summarized below:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in process $160,053 $145,885
Finished goods 24,890 26,398
Less progress billings (22,485) (21,428)
-------- --------
Net inventories $162,458 $150,855
-------- --------
-------- --------
</TABLE>
3. Net interest expense is composed of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
---------------------- ----------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Interest expense $22,230 $23,883 $11,271 $11,457
Interest income (3,590) (1,598) (1,395) (620)
------- ------- ------- -------
Interest - net $18,640 $22,285 $ 9,876 $10,837
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
4. The Company adopted an Employee Stock Purchase Plan (the "Plan") in June
of the current year to become effective September 1, 1996. Under the
Plan, the Company is authorized to issue up to 2.5 million shares of
common stock for purchase by full-time employees of the Company or
designated subsidiaries who choose to participate. Such number of
shares, which may comprise authorized and unissued shares or shares
reacquired by the Company, represents the Company's present estimate of
the maximum number of shares which may be purchased under the Plan,
which is scheduled to expire no later than December 31, 2006. Under the
terms of the Plan, employees may elect to have up to 8% of their
annual earnings withheld to purchase the Company's common stock
subject to the limit set forth in Section 423 of the Internal
Revenue Code. The purchase price of the stock under the Plan will
initially be the lower of 85% of the market price on the first or
last day of an offering period, expected generally to have a
duration of six months.
-7-
<PAGE>
WESTERN ATLAS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported higher sales, net earnings and operating profit for the
three and six months ended June 30, 1996 compared with the three and six months
ended June 30, 1995. Segment sales and operating profit were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
------------------------- ---------------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUES
Oilfield Services $ 663,887 $ 614,765 $358,713 $321,574
Industrial Automation Systems 512,060 457,093 267,778 244,394
---------- ---------- -------- --------
Total sales and service revenues $1,175,947 $1,071,858 $626,491 $565,968
---------- ---------- -------- --------
---------- ---------- -------- --------
OPERATING PROFIT
Oilfield Services $ 76,204 $ 71,016 $ 44,042 $ 40,004
Industrial Automation Systems 42,717 36,261 22,182 18,204
---------- ---------- -------- --------
Total operating profit $ 118,921 $ 107,277 $ 66,224 $ 58,208
---------- ---------- -------- --------
---------- ---------- -------- --------
</TABLE>
The Oilfield Services segment reported higher sales and operating profit in the
current three and six months compared with the corresponding prior periods.
Overall operating margins were comparable to those of the corresponding prior
periods.
The Industrial Automation Systems segment reported higher sales
and operating profit for the three and six months compared with the
corresponding prior periods. Intermec, the Company's automated data
collection division, benefited from the success of new product introductions
and higher first and second quarter sales under its five-year purchasing
agreement with the U.S. government. Sales and operating profit of the
Company's Manufacturing Systems Group improved over the corresponding prior
periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and marketable securities of $47.4 million at June 30,
1996, compared with $116.7 million at December 31, 1995. The cash and
marketable securities balance decreased during the second quarter of 1996 as
a result of working capital needs of the Manufacturing Systems Group and the
expanding Oilfield Services segment. The Company expects that cash flow from
operations, along with available borrowing capacity, will be adequate to meet
strategic objectives as well as working capital requirements. The Company
currently has unused committed credit facilities with a group of banks which
permit the borrowing of up to $400 million.
-8-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Reports on Form 8-K: No reports on Form 8-K have been filed by the
Registrant during the quarter ended June 30, 1996.
(b) See Exhibit Index included herein on page 10.
-9-
<PAGE>
WESTERN ATLAS INC.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
2.1 Stock Purchase Agreement dated December 7, 1993, among Western
Atlas Inc., Western Atlas International, Inc., Western Research
Holdings, Inc., Litton Industries, Inc. and Dresser Industries,
Inc. (Filed as Exhibit 10M to Amendment No. 1, filed with the
Commission on December 13, 1993 ("Amendment No. 1") to the
Company's Registration Statement on Form 10 No. 1-12430 filed
with the Commission on October 12, 1993 and incorporated herein by
reference.)
2.2 Agreement dated as of January 13, 1994, between Western Atlas
International, Inc. and Halliburton Company (Filed as Exhibit 10S
to Amendment No. 2, filed with the Commission on January 19, 1994
("Amendment No. 2"), to the Company's Registration Statement on
Form 10 No. 1-12430 filed with the Commission on October 12, 1993
and incorporated herein by reference.)
4.1 Indenture dated as of May 15, 1994 between the Company and The
Bank of New York, Trustee, providing for the issuance of
securities in series, filed as exhibit 4.4 to the Company's
June 30, 1994 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
4.2 Form of 8.55% Debentures due 2024 issued by the Company under such
indenture, filed as exhibit 4.5 to the Company's June 30, 1994
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
4.3 Form of 7-7/8% Notes due 2004 issued by the Company under such
indenture, filed as exhibit 4.6 to the Company's June 30, 1994
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
4.4 Other instruments defining the rights of holders of other long-
term debt of the Company are not filed as exhibits because the
amount of debt authorized under any such instrument does not
exceed 10% of the total assets of the Company and its consolidated
subsidiaries. The Company hereby undertakes to furnish a copy of
any such instrument to the Commission upon request.
-10-
<PAGE>
INDEX TO EXHIBITS, (CONTINUED)
4.5 Rights Agreement, dated as of August 17, 1994 between Western
Atlas Inc. and Chemical Trust Company of California, as Rights
Agent, which includes the form of Certificate of Designations
setting forth the terms of the Series A Junior Participating
Preferred Stock, par value $1.00 per share, of Western Atlas Inc.,
as Exhibit A; the form of Right Certificate, as Exhibit B; and the
Summary of Rights to Purchase Preferred Shares, as Exhibit C,
filed as Exhibit 4 to the Company's August 17, 1994 current report
on Form 8-K, and incorporated herein by reference. Pursuant to
the Rights Agreement, printed Right Certificates will not be
mailed until as soon as practicable after the earlier of the tenth
day after the public announcement that a person or group has
acquired beneficial ownership of 15% or more of the Common Shares
or the tenth business day (or such later date as may be determined
by action of the Board of Directors) after a person commences, or
announces its intention to commence, a tender offer or exchange
offer the consummation of which would result in the beneficial
ownership by a person or group of 15% of the Common Shares.
4.6 $400,000,000 Amended and Restated Credit Agreement dated as of
December 22, 1994, among Western Atlas Inc., the Banks listed
therein, and Morgan Guaranty Trust Company of New York as Agent,
and Bank of America National Trust and Savings Association, The
Bank of New York, Chemical Bank, CIBC Inc., Continental Bank,
N.A., NationsBank of Texas, N.A., Union Bank of Switzerland,
Los Angeles Branch, and Wells Fargo Bank, N.A. as Co-Agents,
filed as exhibit 4.9 to the Company's 1994 Annual Report on Form
10-K and incorporated herein by reference.
4.7 Amendment No. 1 to the $400,000,000 Amended and Restated Credit
Agreement, dated as of March 20, 1996, included in this Quarterly
Report on Form 10-Q filed with the Securities and Exchange
Commission.
10.1 Distribution and Indemnity Agreement dated March 17, 1994,
between Litton Industries, Inc. and Western Atlas Inc., filed as
Exhibit 10.1 to the Company's March 31, 1994 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
10.2 Tax Sharing Agreement entered into March 17, 1994, between Litton
Industries, Inc., and Western Atlas Inc., filed as Exhibit 10.2 to
the Company's March 31, 1994 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.3 Employee Benefits Agreement dated as of March 17, 1994, between
Litton Industries, Inc., and Western Atlas Inc., filed as Exhibit
10.4 to the Company's March 31, 1994 Quarterly Report on Form
10-Q, and incorporated herein by reference.
-11-
<PAGE>
INDEX TO EXHIBITS, (CONTINUED)
10.4 Intellectual Property Agreement dated March 17, 1994, between
Litton Industries, Inc., and Western Atlas Inc., filed as Exhibit
10.5 to the Company's March 31, 1994 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.5 Western Atlas International Agreement made as of March 17, 1994,
among Litton Industries, Inc., Western Research Holdings, Inc.,
and Western Atlas Inc., filed as Exhibit 10.8 to the Company's
March 31, 1994 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
10.6 Western Tax Agreement made as of March 17, 1994, between Litton
Industries, Inc., and Western Research Holdings, Inc., filed as
Exhibit 10.9 to the Company's March 31, 1994 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
10.7 Change in Control Employment Agreements dated as of March 17,
1994, between Western Atlas Inc., and each of Alton J. Brann,
Joseph T. Casey, John R. Russell and Norman L. Roberts, filed as
Exhibit 10.11 to the Company's March 31, 1994 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
10.8 Change in Control Employment Agreements dated as of November 16,
1995, between Western Atlas Inc., and each of Orval F. Brannan
and Damir S. Skerl, filed as exhibit 10.20 to the Company's 1995
Annual Report on Form 10-K and incorporated herein by reference.
10.9 Western Atlas Inc. Director Stock Option Plan, filed as Exhibit
10.12 to the Company's March 31, 1994 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.10 Western Atlas International, Inc. Benefit Restoration Plan (Filed
as Exhibit 100 to Amendment No. 2 and incorporated herein by
reference.)
10.11 Western Atlas International, Inc., Supplemental Retirement Plan
(Filed as Exhibit 10P to Amendment No. 1 and incorporated herein
by reference.)
10.12 Supplemental Retirement Agreement between Western Atlas Inc. and
Alton J. Brann dated March 17, 1994, filed as Exhibit 10.16 to
the Company's March 31, 1994 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.13 Western Atlas Inc. Restoration Plan (Filed as Exhibit 10U to
Amendment No. 2 and incorporated herein by reference.)
10.14 Resolutions adopted by Board of Directors of Western Atlas Inc. on
March 17, 1994, with respect to Incentive Loan Program and form of
promissory note to evidence loans made thereunder, filed as
Exhibit 10.20 to the Company's March 31, 1994 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
-12-
<PAGE>
INDEX TO EXHIBITS, (CONTINUED)
10.15 Western Atlas Inc. Deferred Compensation Plan for Directors, filed
as exhibit 10.22 to the Company's 1994 Annual Report on Form 10-K
and incorporated herein by reference.
10.16 Western Atlas Inc. Individual Performance Award Plan, filed as
exhibit 10.23 to the Company's 1994 Annual Report on Form 10-K and
incorporated herein by reference.
10.17 Western Atlas Inc. 1995 Incentive Compensation Plan, filed as
exhibit 10.24 to the Company's 1994 Annual Report on Form 10-K and
incorporated herein by reference.
10.18 Western Atlas Inc. Supplemental Executive Retirement Plan, filed
as exhibit 10.21 to the Company's 1995 Annual Report on Form
10-K and incorporated herein by reference.
10.19 Employment Agreement dated as of December 9, 1995, between
Western Atlas Inc., and Clayton A. Williams, filed as exhibit
10.22 to the Company's 1995 Annual Report on Form 10-K and
incorporated herein by reference.
10.20 Western Atlas Inc. 1993 Stock Incentive Plan, as amended on
February 13, 1996, filed as exhibit 10.23 to the Company's 1995
Annual Report on Form 10-K and incorporated herein by reference.
11 Statement of Computation of Earnings per share included herein
on page 14.
27 Financial Data Schedule (filed only electronically with the
Securities and Exchange Commission).
-13-
<PAGE>
WESTERN ATLAS INC.
PRIMARY EARNINGS PER SHARE AND FULLY DILUTED EARNINGS PER SHARE
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE
Net earnings $52,537 $43,462 $29,853 $24,273
------- ------- ------- -------
------- ------- ------- -------
Primary earnings per share $0.97 $0.81 $0.55 $0.45
------- ------- ------- -------
------- ------- ------- -------
Fully diluted earnings per share $0.97 $0.81 $0.55 $0.45
------- ------- ------- -------
------- ------- ------- -------
SHARES USED IN PRIMARY EARNINGS
PER SHARE COMPUTATION
Weighted average common shares
outstanding 53,363,289 52,992,396 53,446,811 53,042,350
Common stock equivalents 964,863 803,646 967,470 845,955
---------- ---------- ---------- ----------
Common and common equivalent
shares - primary 54,328,152 53,796,042 54,414,281 53,888,305
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SHARES USED IN FULLY DILUTED EARNINGS
PER SHARE COMPUTATION
Common and common equivalent
shares - primary 54,328,152 53,796,042 54,414,281 53,888,305
Additional potentially dilutive
effect of stock options 23,641 49,514 - 324
---------- ---------- ---------- ----------
Common and common equivalent
shares - fully diluted 54,351,793 53,845,556 54,414,281 53,888,629
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
-14-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERN ATLAS INC.
(Registrant)
By /s/ J. T. Casey
-------------------------
Joseph T. Casey
Vice Chairman and
Chief Financial Officer
August 12, 1996
-15-
<PAGE>
[EXECUTION COPY]
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of March 20, 1996 among WESTERN ATLAS INC.
(the "Borrower"), the BANKS listed on the signature pages hereof (the "Banks")
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"), and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, THE BANK OF NEW YORK,
CHEMICAL BANK, CIBC INC., NATIONSBANK OF TEXAS, N.A., UNION BANK OF
SWITZERLAND, LOS ANGELES BRANCH, and WELLS FARGO BANK, N.A., as Co-Agents.
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a
Credit Agreement dated as of December 22, 1994 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as
set forth below:
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Agreement shall have the meaning assigned to such term in the Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other
similar reference contained in the Agreement shall from and after the date
hereof refer to the Agreement as amended hereby.
SECTION 2. Amendment of the Agreement. The Agreement is
hereby amended as follows:
(a) The following new definition is added to Section 1.01 in
its appropriate alphabetical position:
Page 1
<PAGE>
"PetroAlliance" means PetroAlliance Services
Company Limited, a Cyprus limited liability company.
(b) The definition of Consolidated Subsidiary is hereby
amended by the addition of the following proviso thereto:
provided that PetroAlliance shall not be deemed a Consolidated
Subsidiary.
(c) The definition of Subsidiary is hereby amended by the
addition of the following proviso thereto:
provided that PetroAlliance shall not be deemed a Subsidiary.
(d) Clause (ii) of the definition of Intangible Assets is
amended to read as follows:
(ii) all investments in unconsolidated Subsidiaries and,
to the extent the same exceed $10,000,000 in aggregate amount,
all direct and indirect investments in PetroAlliance and all
equity investments in other Persons which are not Subsidiaries
(other than investments in readily marketable securities) and
(e) The definition of Termination Date is amended to read as
follows:
"Termination Date" means December 22, 2000
(or if such date is not a Euro-Dollar Business Day, the next
preceding Euro-Dollar Business Day).
SECTION 3. Pricing Schedule. The Agreement is further amended
by replacing the existing Pricing Schedule with the attached Pricing Schedule.
SECTION 4. Changes in Commitments. With effect from and
Page 2
<PAGE>
including the date this Amendment becomes effective in accordance with
Section 6 hereof, the Commitment of each Bank shall be the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount
may be reduced from time to time pursuant to Section 2.09 of the Agreement.
Any Bank whose commitment is changed to zero shall upon such effectiveness
cease to be a Bank party to the Agreement, and all accrued fees and other
amounts payable under the Agreement for the account of such Bank shall be due
and payable on such date; provided that the provisions of Section 9.03 of the
Agreement shall continue to inure to the benefit of each such Bank.
SECTION 5. Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 6. Counterparts; Effectiveness. This Amendment may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Amendment shall become effective as of the date hereof
when the Agent shall have received duly executed counterparts hereof signed
by the Borrower and each of the Banks (or, in the case of any party as to
which an executed counterpart shall not have been received, the Agent shall
have received telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
WESTERN ATLAS INC.
By:
Page 3
<PAGE>
Title:
Commitments
$46,750,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
Title:
$31,170,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Title:
$31,170,000 THE BANK OF NEW YORK
By:
Title:
$31,170,000 CHEMICAL BANK
By:
Title:
$31,170,000 CIBC INC.
By:
Title:
$31,170,000 NATIONSBANK OF TEXAS, N.A.
Page 4
<PAGE>
By:
Title:
$31,170,000 UNION BANK OF SWITZERLAND,
Los Angeles Branch
By:
Title:
By:
Title:
$31,170,000 WELLS FARGO BANK, N.A.
By:
Title:
$20,780,000 CREDIT SUISSE
By:
Title:
$20,780,000 DRESDNER BANK AG
By:
Title:
By:
Title:
$20,780,000 MELLON BANK, N.A.
By:
Title:
$20,780,000 NBD BANK
Page 5
<PAGE>
By:
Title:
$20,780,000 TORONTO DOMINION (TEXAS), INC.
By:
Title:
$15,580,000 BANK OF HAWAII
By:
Title:
$15,580,000 THE NORTHERN TRUST COMPANY
By:
Title:
$-0- FIRST INTERSTATE BANK OF CALIFORNIA
By:
Title:
Total Commitments
$400,000,000
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate"
for any day are the respective percentages set forth below in the applicable
Page 6
<PAGE>
row under the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
Level Level Level Level Level Level Level
Status I II III IV V VI VII
<S> <C> <C> <C> <C> <C> <C> <C>
Euro-Dollar Margin .08% .12% .16% .20% .275% .325% .50%
CD Margin .205% .245% .285% .325% .40% .45% .625%
Facility Fee Rate .07% .08% .09% .10% .125% .175% .25%
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"D&P" means Duff & Phelps Credit Rating Co.
"Level I Status" exists at any date if, at such date, the
Borrower's long-term debt is rated AA-/Aa3 or higher by at least two Rating
Agencies.
"Level II Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A+/A1 or higher by at least two Rating
Agencies and (ii) Level I Status does not exist at such date.
"Level III Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A-/A3 or higher by at least two Rating
Agencies and (ii) neither Level I Status nor Level II Status exists at such
date.
"Level IV Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+/Baa1 or higher by at least two Rating
Agencies and (ii) none of Level I Status, Level II Status or Level III Status
exists at such date.
Page 7
<PAGE>
"Level V Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB/Baa2 or higher by at least two Rating
Agencies and (ii) none of Level I Status, Level II Status, Level III Status or
Level IV Status exists at such date.
"Level VI Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB-/Baa3 or higher by at least two Rating
Agencies and (ii) none of Level I Status, Level II Status, Level III Status,
Level IV Status or Level V Status exists at such date.
"Level VII Status" exists at any date, if at the close of
business on such date, none of Level I Status, Level II Status, Level III
Status, Level IV Status, Level V Status or Level VI exists.
"Moody's" means Moody's Investors Service, Inc., and its
successors.
"Rating Agencies" means D&P, Moody's and S&P.
"S&P" means Standard & Poor's Ratings Group, and its successors.
"Status" refers to the determination of which of Level I
Status, Level II Status, Level III Status, Level IV Status, Level V Status,
Level VI Status or Level VII Status exists at any date.
The credit ratings to be utilized for purposes of determining a
Status hereunder are those assigned to the senior unsecured long-term debt of
the Borrower without third-party credit enhancement, and any rating assigned to
any other debt of the Borrower shall be disregarded; provided that if at any
time the Borrower's senior unsecured long-term debt is rated by exactly two
Rating Agencies and the ratings assigned to such debt by such two Rating
Agencies are more than one full rating category apart, Status shall be
determined based on a rating one category higher than the lower of such two
Page 8
<PAGE>
ratings (e.g., if the S&P rating is A+, the Moody's rating is Baa1 and there
is no D&P rating, then Level III Status shall exist); provided further that if
at any time the Borrower's senior unsecured long-term debt, without third
party credit enhancement, is not rated by at least two Rating Agencies, then
Status shall be Level VII Status. The rating in effect at any date is that
in effect at the close of business on such date.
Page 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 47,424
<SECURITIES> 0
<RECEIVABLES> 661,608
<ALLOWANCES> 0
<INVENTORY> 162,458
<CURRENT-ASSETS> 1,023,032
<PP&E> 1,397,171
<DEPRECIATION> 651,264
<TOTAL-ASSETS> 2,516,443
<CURRENT-LIABILITIES> 501,386
<BONDS> 564,797
0
0
<COMMON> 53,547
<OTHER-SE> 1,366,284
<TOTAL-LIABILITY-AND-EQUITY> 2,516,443
<SALES> 0
<TOTAL-REVENUES> 1,175,947
<CGS> 0
<TOTAL-COSTS> 813,040
<OTHER-EXPENSES> 256,729
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,230
<INCOME-PRETAX> 87,538
<INCOME-TAX> 35,001
<INCOME-CONTINUING> 52,537
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,537
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
</TABLE>
